'Every night, we were in the Polo Lounge, drinking Cristal' and other amazing quotes about the reign of the junk bond king

Twenty-five years after Drexel Burnham Lambert filed for
bankruptcy, some alumni are getting together this week for a
reunion in New York.

So
Bloomberg's Max Abelson, Jason Kelly, and David Carey put
together an extensive, incredible oral history of the former
investment bank. It was once the fifth-largest on Wall Street
until it capitulated due to illegal junk bond trading activities
led by trader Michael Milken.

Bloomberg interviewed more than a dozen former Drexel bankers,
traders, and clients, as well as regulators, to narrate
Milken's – and
Drexel's – journey through junk
bonds. To them, he was more than a man:

"He would speak in parables. … It became almost like mystical,"
said Don Engel, a former Drexel investment banker.

Former colleagues described how Milken's revolutionary junk bond
trades transformed the bank from a second-rate institution to the
Wall Street titan it became.

"I would pick him up in the morning, and I would take him home at
night... when you saw him in the morning, he'd be reading the
paper. He'd be looking at the spreadsheets, the trading sheets,
and there would be very, very little conversation or anything
personal. At night he'd be giggling and laughing," said Lorraine
Spurge, who led capital markets at Drexel.

They described the good times, when major clients started to roll
in...

"We had a major fight/discussion for a couple years before we did
our first Las Vegas casino. Because we weren't convinced that it
was morally the right thing to do. Is it taking money from people
who can't afford it in a less than socially desirable fashion?
Ultimately we turned around and we looked at it and we saw that a
number of our competitors were financing them," said G. Chris
Andersen, who was head of the investment banking wing, describing
the bank's relations with Steve Wynn.

"The blanket term greed has no meaning. … That's just an
adjective for people who write about this who don't understand
what it was like," said Peter Ackerman, who was head of
international capital markets.

Clients and traders described Drexel's annual convention, held to
match companies in need of financing with investors...

"The so-called Predators'
Ball, which I always thought was a s----- name. … It just
did not correctly reflect the substance and level of intellectual
discourse that actually happened," said Leon Wagner, an executive
in the junk bond department.

"Whatever the conference cost us, in the millions, we made it up
in the first hour because deals were done there," said Engel.

"The Polo Lounge was our
headquarters. In the Polo Lounge—from Monday night, right through
Saturday—every night, we were in the Polo Lounge, drinking
Cristal. ...We stayed up until 4 or 4:30 and they served
breakfast, and then we went to the conference," said
Engel.

...And the bank's influence in Washington:

"There were 25 pieces of legislation entered in the Congress of
the United States of America to try and outlaw the sale of junk
bonds. … So I took several of my guys and went to Washington for
the spring and summer of 1985. And I got 25 pieces of legislation
withdrawn," said Andersen.

But then things started to shift...

"It might not have been the greatest thing for Drexel to have
used junk bonds for hostile takeovers," admitted Sorte.

"I don't think we ever really understood how pissed off people
were getting in the rest of the financial markets. I don't want
to sound haughty about the thing, but even in retrospect, people
couldn't compete," said Richard Sandler, a Drexel consultant and
Milken's personal lawyer, referring to rivals on Wall Street.

Regulators started to arrest traders, one at a time.

"I sat there in the bunker for eight days, and I called Fred and
I said, 'Fred, we've got it wrong. They're not trying to hurt us.
They're trying to kill us,'" said Anderson, referring to then-CEO
Fred Joseph.

"Except for the craziness of the investigation, I think the firm
did some of its very best work. … RJR Nabisco happened after Boesky.
Mellon Bank deal happened after Boesky," said Ackerman, referring
to insider trader and Drexel client Ivan Boesky, who was arrested
in 1986.

In 1989, Mike Milken was indicted.

"The spirit and the moral fiber were broken by the great one not
being there. It was a tragedy," said Engel.

"Some of these crazy guys, they tried to buy an airline ticket
around the world quickly while the credit card still worked," Jon
Sokoloff, who worked in corporate finance.

Since 1990, the high yield, or junk, bond market has steadily
grown.

Former Drexel employees and clients reflected on the aftermath of
Drexel's implosion — and qualify it.

"Even if you said some of these things were wrong or even
illegal, they were done to try and help people out where
practically nobody was getting hurt, where you're talking about
eighths of a point on a $43 stock. Who gives a s---? And in
retrospect, they're nothing compared to the fraud of the '90s and
2000s," said Stephen Weinroth, who was in charge of underwriting.

"We live in a society where the president of the United States
was getting blow jobs in the Oval Office. And nobody's perfect.
And people make mistakes," added Wagner.

And some still stand by their actions:

"Somebody did something and called for a vote on who had the
greatest positive influence, Michael Milken or Mother Teresa. And
Michael Milken won hands down," said Anderson.